Garner Tongyeong International has today outlined the U.S. dollar's current historic run - a level last seen nearly two decades ago.

The world's reserve currency has gained nearly 9% against a basket of currencies since Russia invaded Ukraine. The currency is now trading at $1.05 against the Euro, and more analysts are speculating that the two currencies could soon trade at parity.

"A combination of high inflation and geopolitical instability has driven demand for the U.S. currency," said Michael Hart, Executive Director of Asset Management at Garner Tongyeong International. "We are advising our clients that as long as fear continues to run through the markets, they should expect the dollar to continue rallying higher in the weeks ahead," he added.

More cash is being concentrated into the dollar due to the clamor for safe-havens, the Federal Reserve's aggressive rate increases, and global events such as the Ukraine war and China's lockdowns. It is a market force that will boost Americans' buying power in the face of inflation while simultaneously making exports less appealing. At a time when many economists are warning about the possibility of a recession, a stronger dollar will tighten financial conditions.

"As a result of the global selloff in stocks and bonds, more money is being driven into dollars," said Ian Alexander, Executive Chairman of Garner Tongyeong International. "We estimate that investors have sold $65 billion in stock and bond funds in the last month, the first major outflows since the early 2020 coronavirus outbreak. In addition, our flow data indicates that demand for major currencies is diminishing."

For now, it is difficult to see the dollar losing its dominant currency status, even if the West's rift with Russia becomes permanent and the world more multi-polar.

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Thomas Enfield, Analytics & Research Officer,
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